Investors pick up Pace after earnings accelerate

The Saltaire-based company is enjoying good demand from North American customers for its media servers – the next generation of clever boxes that link together all the devices in the home such as TVs, iPads, tablets, laptops and smartphones, so that content can be viewed on any screen.

The world’s biggest maker of TV set-top boxes reported a 22.5 per cent rise in full-year earnings to £116m in the year to December 31.

Pace, whose customers include Comcast, AT&T and DirecTV, said it expects revenue of about £1.6bn this year. Revenue last year increased 2.7 per cent to £1.48bn.

Revenue in North America, which accounts for more than 60 per cent of total income, rose 16.9 per cent.

Chief executive Mike Pulli said the North American market is being driven by fierce competition.

“The pay TV providers are all fighting for us as consumers,” he said. “The US market is not growing. It’s not just a price game. It’s also a technology game which is good news for us.”

Over the year Pace was confirmed as the market leader in PayTV hardware and the global number one in set-top boxes, media servers and telco gateways.

Set-top box and media server revenues rose 8.4 per cent to £1.19bn in 2013, driven largely by high demand for media servers in North America.

Mr Pulli said the move to media servers and whole home solutions is continuing at speed across the globe. Media servers now make up over 28 per cent of shipments to the US market.

Pace is starting to see demand for media servers elsewhere in the world and it has won a contract with Get TV in Norway and further deals are planned this year with Liberty Global and Foxtel.

The company said it has a strong media server pipeline and anticipates increased demand across the globe in 2014 and future years.

The group has begun shipping media-room enabled digital video recorders and set-top boxes to AT&T and CenturyLink, two of the largest telecommunications providers in North America, and Telefonica in Brazil and Chile.

Despite the launch of media servers, Pace said demand for traditional set-top boxes is still strong. It has won next-generation hardware wins at a number of long-standing tier one customers and it recently announced a new, multi-product deal with Charter Communications, a major cable operator in North America.

Asked where the next big area will be, Mr Pulli said demand is rising in Europe, Asia, India, Eastern Europe and Latin America. “It really varies,” he said. “It almost goes country by country and you have to have the right product for each country.”

Pace said its acquisition of US networking specialist Aurora Networks last year is bedding down well and the integration of the two firms should be completed by the second quarter of 2014.

Aurora manufactures optical systems used by cable companies to build fibre-optic networks. The company makes equipment such as amplifiers, transmitters, receivers and switches.

Pace increased its dividend by 22 per cent in 2013 to 3.3p a share.

“The rise is a combination of confidence in the future and our shareholders deserve it,” said Mr Pulli.

The group’s shares rose 40p to 443.5p last night.

Analyst Lee Simpson at Jefferies said: “Pace has completed a strong year as the self-help story continues. The 2014 outlook suggests more with margin expansion and strong free cash flow as a mix of Aurora integration, synergies and growth in software and services bear fruit.”